Republican Questions Treasury’s Authority to Delay Parts of Obamacare

By Charles S. Clark

March 21, 2014

The chairman of the House oversight panel this week wrote to Treasury Secretary Jack Lew seeking more information on the legal reasoning behind the department’s eight-month-old decision to delay the employer mandate and other provisions in the Affordable Care Act.

The Obama administration’s decision to delay the law’s mandate that employers above a certain size provide health insurance to employees was made in July 2013 and announced in a blog by Mark Mazur, assistant Treasury secretary for tax policy, who in January 2014 was interviewed by the House Oversight and Government Reform Committee staff. Mazur, who has a Ph.D in business and 23 years of service in tax policy in the executive and legislative branches, is not an attorney.

“The committee is concerned that, as part of its role in the law’s implementation, the Department of Treasury is intentionally disregarding core statutory requirements of the law,” said the March 18 letter to Lew signed by Chairman Darrell Issa, R-Calif., and subcommittee chairmen James Lankford, R-Okla., and Jim Jordan, R-Ohio. “These concerns are compounded by serious questions about the constitutionality of the department’s actions.”

Issa’s letter reproduced portions of a transcript of his staff’s interview with Mazur, in which they asked whether anyone in Treasury or the Internal Revenue Service’s Office of Chief Counsel had suggested or argued that the department “lacked a legal authority for the delays.” Mazur’s replies, the transcript selections show, were all along the lines of “I don’t have any recollection of that.”

Those answers are “stunning,” said the lawmakers. “There are more than two thousand attorneys in the Department of Treasury, and the official responsible for tax policy cannot recall a single one inquiring into the legal authority for the employer mandate delay,” the letter stated. “Furthermore, Mr. Mazur’s responses are inconsistent with the department’s claim that it relied upon an asserted authority under [section] 7805 of the Internal Revenue Code.”

The letter seeks copies of all communications on the healthcare law since March 23, 2010, between Treasury, the Executive Office of the President and the Health and Human Services Department relating to the parts of the tax code dealing with Obamacare.

“Information obtained by the committee suggests that last year’s decision to delay the employer mandate was made by the White House and not the Treasury Department,” the letter continues. “We were surprised to learn that the White House chief of staff knew about the employer mandate delay prior to the head of the department implementing the program. This finding raises serious questions about whether the White House directed the delay of the employer mandate for political reasons.”

A Treasury spokeswoman, asked for a response, emailed Government Executive to say “Treasury’s actions with respect to transition relief included in the final regulations are an exercise of the department’s longstanding authority to grant transition relief when implementing new legislation. That authority is provided by section 7805(a) of the Internal Revenue Code, and has been used across administrations to implement changes to the tax law.”

In overseeing IRS administration of the tax code, the spokeswoman continued, “Treasury has traditionally interpreted this authority under section 7805(a) to include providing transition relief as appropriate in connection with changes to the tax law, including, for example, changes to various information reporting, tax withholding, and other provisions of the Internal Revenue Code over the past 10 years or so. Providing transition relief is a means to ensure that changes to the law are implemented for the long term in the most effective and efficient manner.”

The specific authorizing language in section 7805(a) reads: “ ‘Except where such authority is expressly given by this title to any person other than an officer or employee of the Treasury Department, the secretary shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue,’ ” the spokeswoman noted.

Past examples of the authority’s use include changes made in 2007 to the newly enacted Small Business and Work Opportunity Act altering the standards tax return preparers must follow to avoid penalties, Treasury said. The amendments were effective May 25, 2007. On June 11, 2007, the Treasury Department released Notice 2007-54 providing that the IRS would follow the standards in prior law in determining whether to assert penalties for returns due on or before Dec. 31, 2007.

A second precedent cited occurred in 2011. “The Airport and Airway Extension Act, Part IV reinstated the air transportation and aviation fuels excise taxes retroactively to July 23, 2011, when they had expired,” the Treasury spokeswoman said. “On Sept. 9, 2011, Treasury released Notice 2011-69 providing that the excise taxes would not be imposed on purchases of air transportation services made after July 22, 2011 and before August 8, 2011.”

The department spokeswoman did not comment on whether Lew intended to turn over the documents Issa requested.